Hotel Industry Expected to Weather Potential Recession

The DJIA rose 195 points, Nasdaq was down 55 points, the S&P 500 rose 7 points, the 10-year treasury yield was back up .15 to 3.53% and lodging stocks were modestly higher. The volatility is just reaching new levels in treasuries.

Deutsche Bank issued a report, commenting on what they think the trading action in gaming and lodging stocks are telling them. DB said current lodging C-Corp multiples have held up considerably better than the multiples of gaming-related gaming-related entities so they believe in a recessionary environment, lodging stocks likely have more downside risk. The gaming REIT names represent the only only sub-sector within gaming in which current multiples are above both pre and post post pandemic multiples, likely due to the limited risk to negative AFFO revisions revisions, beyond interest rate fluctuations on variable debt. In most instances, post pandemic multiples are lower than pre-pandemic multiples. DB believes this relates relates to recession concerns at present. In some instances the discounted multiples relate to changing business mixes.

Jefferies believes the primary issue affecting stock prices in the group the past week is the banking crisis, notably the pressure on regional banks and its prospective prospective impact on financing of new properties. In terms of C-Corps like Hilton, an important aspect of unit growth is from franchise deals, a majority of which are are financed by regional banks. There is no immediate evidence of impact to deal deal flow or property opens as of yet given the length of the development cycle. cycle. Jefferies will remain acutely focused on pipeline growth in the next few quarters. Larger property development deals would include the CMBS market. Jefferies said CMBS financing was down -36% in 2022 and is down -78% YTD in 2023 with banks taking the greater leverage of CRE financing thus far.

Citigroup lowered their price target on DiamondRock Hospitality to $8 from $10. They maintained their Neutral rating.

Most economists agree the U.S. will experience a recession to some degree in 2023, but hotel industry analysts say sustainable job growth, strong hotel rates and demand, and the yet-unrealized wave of international travelers will help the industry keep its head above water, according to CoStar. The president of Tourism Economics, Adam Sacks, told attendees at the Hunter Hotel Investment Conference that this recession will be mild because of liquidity. Even with all the noise of financial turmoil, households still have an incredible amount of cash on hand. 

Hospitality Ventures Management Group said that they have maintained the forward momentum it experienced in 2022 as evidenced by multiple factors, including industry leading RevPAR Index growth, numerous awards and overwhelmingly positive results from stakeholder satisfaction surveys. HVMG outpaced the industry in RevPAR growth during 2022, as same-store market share grew 6.9% and continued into 2023 with same-store RevPAR growth forecasted to increase 30% over 2022 in the first quarter. Same-store consolidated RevPAR Index growth is up 8% YTD over 2022. Finally, HVMG currently is forecasting 2023 same-store RevPAR to be up 19% vs. 2019. The company continues to take forward steps to stay ahead of its competitors and has invested heavily in next generation technology to capitalize on the large amount of data available internally. HVMG also recently named Cory Chambers to the newly created role of senior vice-president, business intelligence & chief commercial officer to oversee implementation of BI initiatives. 

Banyan Investment Group announced the firm is rebranding as Satori Collective, an investment management firm focusing primarily on hotel property investment. Realizing Satori’s true, core business is real estate investment, the company focuses on investment into select-service, upper select-service, extended-stay and lifestyle hotel properties. Additionally, the company has spun off its property management platform to become Aperture Hotels, an independent, third-party hotel management company. The new company will continue to provide hotel management services but with an eye on expanding its third-party management portfolio and possible management company M&A. Moving forward, Satori and Aperture will work independently of one another.

Concord Hospitality purchased the 135-key Cambria Hotel New York for $48M. We Care Trading Co. Ltd. sold the 18-story building in a transaction that closed March 13. Concord landed $33 million in debt from Western Alliance Bank to refinance previous loans We Care took out on the property, along with securing a $4.9 million gap mortgage. 

Waterton announced the acquisition of Town & Country Stowe, a 54-key independent hotel in Stowe, Vermont. The firm will transform the property with updates to guest rooms and outdoor common areas and will add a mixture of lofted barn suites and cabins. Springboard Hospitality has been tapped to operate Town & Country Stowe on behalf of Waterton. 

Rockbridge and Aparium Hotel Group announced the acquisition of the Heathman Hotel in Portland, Oregon. The property features a lobby library lounge and more than 3,800 square feet of meeting space. A comprehensive renovation and reposition of the iconic property will include the launch of a new flagship restaurant and bar along with an additional cocktail bar. 

In Charleston, South Carolina, a new waterfront hotel that’s under construction on the peninsula has plans of opening in early 2025. The 209-room hotel, which was originally expected to open last year, said construction is back on track. The six- story hotel will include ground-floor retail and event space, an infinity pool pool overlooking the water, a brand-new dock, multiple food options and a rooftop venue and lounge.

A Best Western Plus has opened in Horseheads, NY on the location of the former Landmark Inn. The hotel has 102 rooms, a pool, gazebo with an outdoor fire pit, a fitness center and soon a restaurant in the coming months.

Palisociety announced the reopening of Palihouse West Hollywood in Los Angeles, California. It replaces the previous location on Holloway Drive which closed during the pandemic. The boutique hotel offers 95 guest rooms, a pool and lounge area, a fitness room and two dining spots.

El Cosmico is the first hotel in the world that has used 3D printing technology as part of its construction. The property is expected to open in 2024 in Texas. El Cosmico used to be a campground in Marfa, Texas. However, under the collaboration between hospitality expert Liz Lambert, ICON, and Bjarke Ingels Group, the glamping site is getting a relocation and renovation into a larger, more technologically advanced hotel. The former 21-acre venue will be relocated onto a 62-acre land with an infinity pool, an open-air spa, and a communal space. In addition to the upcoming hotel, the team also aims to offer 3D-printed housing in Marfa called Sunday Homes.

Hotel chain Travelodge is writing to 220 local authorities across Britain proposing a joint development partnership aimed at stimulating regeneration and economic growth. Travelodge said it has identified that it can expand its UK hotel network with a further 300 locations for new hotels. The company said the expansion program could represent an investment of around £3 billion for third-party investors and create more than 9,000 jobs across the UK.

La Fonda Heritage Hotel is opening on April 1, 2023, in the heart of the Old Town neighborhood of Marbella, Spain, as the first Relais & Châteaux property in Andalusia. Comprising three meticulously restored historical buildings, La Fonda Heritage Hotel will feature 20 rooms including three suites, gourmet restaurants, open courtyards and a sky-bar. La Fonda has been restored to its former glory, retaining its original features, ancient walls and murals, whilst contemporary design, exclusive amenities, and fine dining have brought this boutique hotel into the 21st century.